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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

March 1, 2010 at 10:10 AM

What to watch in the economy in March; the copper scare

Top of the News: March rolls in after unseasonably warm January and February and “climate change is a hoax.” Don Kohn calls it quits at the Federal Reserve, complicating Ben Bernanke’s consensus on how to draw down that $1 trillion in liquidity in the system. At the monopoly board, Microsoft and Google are engaged in a vigorous shouting match of “pot!” and “kettle!”

Here’s what I’m watching in March: 1) Sovereign debt: Greece is the tip of this iceberg and the Titanic of the world economy is being gamed by Wall Street, which is both enabling the concealment of the debt and betting these countries will go down. Can you say, “Unsustainable.” 2) Deleveraging: The huge overhang of debt from the ’00s, from personal to corporate, remains largely in place, preventing a true healthy recovery; 3) Commercial real estate. Will it deflate slowly or blow up like an unoccupied Death Star? Either way, it will be a drag on growth. 4) Health care: Without meaningful reform, the American economy is facing cost increases and dropped coverage that will be an ongoing economic and social crisis.

Finally, not to be a one-note-Jonny, but the labor market remains paramount. It really doesn’t matter if consumer spending ticked up a little in January if joblessness remains around a real 17 percent and no end is in sight.

And they say April is the cruelest month.

The Back Story: Copper prices are up today, with the earthquake in Chile, the world’s largest copper producer. This even though there’s no indication the mines were damaged. Karl Denninger on the Market Ticker has this on-point observation:

So why did price spike more than 8 percent even though all this was known by the market before it re-opened for trading? No part of the markets are trading on fundamental values, nor on forward business expectations. They are instead trading as “hot money” repositories where speculators rotate in and out of various instruments literally on a minute-by-minute basis.

This is how crashes happen.

He goes on: “When there is no fundamental value underlying a market there is no floor on price. Price then becomes one thing and one thing only – the number at which you can find another sucker to take your position from you.

A truism that applies to much in the economy today.

Today’s Econ Haiku:

What’s strapped to your hip?

Starbucks says it’s no problem

Make that triple shot

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